Finances- what to expect?

[Gruffalowoods]

So whilst awaiting a meeting with a solicitor to discuss all options- I wondered if anybody knows how likely I am to be able to keep my home.

We have recently filed for divorce. I currently live in the family home worth roughly 350k (although a niche home- possibly not easy to sell). Currently have about 150k equity. He lives in a rented house and is making plans to move in with his g/f.

No real savings/ anything else of value. Each have a pension- am unsure of the exact amounts but likely to be very similar, his probably about £5k more.

We have 3 children (toddler- infant school age) together that reside with me- he has contact EOW (his choice).

We both work full time and earn a near identical salary (45k-ish) although he then gets the opportunity for overtime whilst I have no childcare.

I can afford to take over the mortgage- I have been paying it on my own anyway for the last 3 years and the banks I have spoken to will lend me that amount. But I’m unable to borrow enough to also give him some equity.

Is there any way I’m likely to be able to keep the house? or should I accept I will have to move and uproot the kids- small village am unlikely to be able to afford anything near the school etc.

First question to ask is is your ex willing to defer his share ? If so for how long ? And how do you propose to repay him

as you both earn the same it’s possibly likely to be a 50:50 split. What properties can you get with half equity plus your mortgage ?

It really does depend on what the pensions are worth. You can't make decisions until you know how much there is

I can get a 3 bed property with half the equity-+ mortgage- but unlikely to be in the same area that our DC are at school. And I think I know it’s inevitable but I just don’t want to. I want to raise the children in their home and not uproot them. It’s all just so unfair!

Obviously he will be entitled to some money- I just hope he will defer his equity until the boys are older. He has always been fairly reasonable- but this seems to bring the worst out in everybody …

Your best option is to negotiate with him, he might be willing to delay his equity for a number of years but I doubt the court would make him

The issue is if he defers, say for 10 years, thdn you have to find more money ( assuming house price increases)
yiu thdn either have to sell, and move and actually your children will still need to be housed, or raise larger mortgage and when are 10 years close to retirement etc
it ties you financially for a long period, impacts his ability to buy and imo kicks the can Down the road

meshers are usually only awarded if they are absolutely the only option, if he does not agree to defer

Could some equity in the house be offset by not paying maintenance for the kids? Could you cope financially this way?

Made for- this is not possible as after 12 months op can claim cms regardless so no solicitor would agree to this

What would be unfair if you get all the equity in the house to be able to stay there.
Insane that this what you expect.

It genuinely isn’t about the equity- it isn’t about money. It is about having three children whose lives have already been so disrupted in the last few years and worrying how I can keep any sort of stability for them!

Thank you to everybody with helpful comments.. has given me some things to think about

I understand but also kids are resilient and mo e all the tine for many reasons

do t fight to keep a house if there are other options.

have you asked him to defer share ? Has he said what he wants ( not that you have to agree)

He originally said he was happy to defer. Then he said he wants ‘what’s his’. Now I would prefer to gather options and information and then discuss it when we go through mediation… assuming that’s what will happen at some point, the process is very new to me!

of course the downside of waiting, with the way interest rates have been rising and what the bank will lend me has decreased- and so there are less options on what I can do.

If it’s decided that we have to sell- what happens if we can’t find a buyer- does it just drag on forever? It will feel very unfair if he gets 50% whilst I pay all the mortgage forever!

It might feel unfair but his capital and money is tied up and not available to him - so it’s fair it grows in line - like an investment

he might not get 50%
your solicitor will help you reach a ‘fair outcome’ but as you earn similar its more likely to be nearer to 50:50 unless you can agree between you

Whilst it may not be a hard and fast rule, generally sorting out finances and making a clean break is generally the best course of action. Because of “events” which can make things worse.

Selling the property six months ago and buying something affordable would have easier and financially more sensible for both of you. Interest rates were always going to rise. Who knows how bad things will get. You might not even be able to get him off the mortgage never Ming buy him out.

Realistically and practically can you afford to live in this village long term? At what point would selling, or buying him out, not be disruptive for your children. How long before some of the children are at secondary school and some at the village primary? That’s a logistical nightmare for a single parent who needs to work full time to pay a large mortgage.

I don’t advocate moving children out of school and away from friends if it can be avoided. However if it is inevitable the sooner you do it the better.

I understand that it feels unfair that you are paying the mortgage but he is having to pay rent to live elsewhere

I've picked up from this post that you don't understand the financial mechanics behind a Mesher Order and I would strongly urge you to do so before you pursue this approach further. On the one hand, you're taking a very one sided view of the Order and not considering it from your ex-husband's position so your understanding of fairness is skewed. On the other, your idea of fairness would actually expose you to more financial risk. This is something people would have been more aware of in the 1980s when these orders were popular but people don't tend to think about now as house prices have been rising fairly reliably for a quarter of a century (with only a temporary blip in 2008).

Essentially, what you want is for your husband to have a considerable amount of his net worth invested in the property that you live in and also, potentially, for you to use a significant part of his mortgage capacity that restricts what he could buy himself or that could even force him to rent for a very long time. From his perspective that means dead money in rent and potentially being "out of the game" for a long time whilst house prices rise further. So his long term financial future is being exposed to high levels of market risk.

Imagine if that was a bank lending you the money. Do you think they would really do that for free? Of course not, they charge you interest in the form of a mortgage. Otherwise, they would be better using the money in another way. But you're not going to be doing that with your husband's investment. You're going to pay him nothing at all for years and also deny him the use of the asset his money is invested in. So quite rightly you owe him an occupational rent which is why that means you have to pay the full mortgage but he still receives 50% of the equity at the end of it. It equalises your exposure to market risk; it means the person using the asset pays for using it and it means you both have a similar ability to buy property when your children are all grown up.

However, I will say at this juncture that you would probably be better off selling and splitting now because it will be easier to both get bigger mortgages at your age. It doesn't make great financial sense to use a Mesher Order for either party which is why they are a last resort. Even using your share of the capital to buy a flat to rent out and then renting in the village might be better for your long term financial future. Definitely worth sitting down with a financial advisor to discuss anyway.

Also, your idea of fairness where you pay the mortgage and get a larger share could backfire spectacularly. If you ended up in negative equity, the larger part of the debt would be yours. Also, you would have more of your capital tied up in one investment that could tank and the likelihood is he would get more of the pensions (quite possibly including some of yours) to even things out. That's probably not a great idea for you in the current market. Again, I would stress the value of discussing this with a financial advisor.

Thank you.

Although to clarify- I am happy to pay 100% of the mortgage and have been doing- and would obviously put it in my name if that is what happens. I just think if (when) I’m being forced to sell the house- it will no longer feel like mine and that’s the point I would really begrudge him not contributing. I currently pay 100% of property and child costs- as he wanted a chance to ‘establish a new life’. Which was probably also stupid to agree to- but at the time I wasn’t in a particularly good place to argue.

Our first house was also initially purchased with my savings/inheritance. I appreciate that no longer is relevant- as we subsequently married and have sold and bought houses to move up the ladder. But adds to the emotional side.

ultimately- if I lose the house that is what will happen and I will accept and make the best of it- and will receive (and listen) to legal advice to ensure I am able to continue to provide for DC.

I appreciate it needs to be practical decisions- but it is very hard to lose the husband/life/house that I have spent the last 20 years working for- combined with the stress of single parenting young children and full time work.

You may be paying 100% if mortgage but his capital would be tied up which is a big impact to him, hence you owe him that with growth ( assuming house price rise )

Okay, again, you still don't understand the financial mechanics of the Mesher Order and you're only looking at it from your perspective. So let's look at it from your husband's perspective with as many figures as possible.

There is currently £75k in equity each and you both have a need to be housed though his is less than yours as he only has the children EOW. Let's say you need a 3 bedroom house (£350k?) and he needs a 2 bedroom flat (£200k?). If he got his share now he would need a mortgage of £125k. If he had to wait, he would need to save a deposit of £20k before he could buy, which on top of child maintenance will take him several years to do during which time he will have to spend around £12k a year on rent. The reason he will have to do so is because he will have his capital tied up in your house. I reckon it will take him at least 4 years to save up during which time £48k would be spent on rent and during which time house prices might increase out of his reach (bit more of a question mark on that nowadays but the risk is nonetheless there). If house prices rise by 3% a year, that's another £25k he's out of pocket within just 4 years, a combined total of £73k and all because you are using his capital.

When he does buy in 4 years time he will need a 90% LTV mortgage compared to your less than 60% LTV mortgage and his interest rates will also be higher. With a now £200k mortgage because of house price rises he'll probably pay an interest rate of around 2% more than you for the for the first 5 years. On a £200k mortgage that's roughly going to be £4k a year. That's another £20k he's out of pocket because you're using his share of the capital, a total of £93k out of pocket now by year 9.

That's not including the fact that he has less investment in the property market than you because you're using his £75k. If house prices rise by 3% for the next 9 years that investment will be worth £98k. That's another £23k, so a total now of £116k.

So what's he actually going to get in 9 years if the equity is then split 50/50? To get his fair share of the money back he needs to get the £116k, plus the original £75k and minus what you've been paying for his share of the mortgage.

If we assume on average you have a £200k mortgage over 25 years with an average interest rate of 4% and assuming a 3% return then in year 9 the house will be worth £457k and the outstanding mortgage will be £150k. You will have paid £1k a month of which £500 will be his which totals £6k a year and £45k over 9 years. Let's crunch the numbers.

What he ought to get to compensate for his costs = £116k + £75k - £45k = £146k

What he will get from 50% of equity = £153.5k.

Not a huge difference is there?

Please do not do anything without seeking legal advice. There is a lot more to it than meets the eye, I am going through similar. The rules vary between Scotland and England (I'm unsure where you are) Please do not be swayed by any advice unless it is from a solicitor as it is only them who have the knowledge

I wouldn't rely solely on a solicitor either. Advice from both a solicitor and a financial advisor should be necessary for anyone contemplating a messy, unfinished financial situation for years after a divorce.